Industry News

Builders lose confidence

War jitters and national economic and job market weakness came down on home builders' confidence in early March, the National Association of Home Builders reported today.

NAHB's housing market index, a monthly gauge of builder sentiment fell 10 points to 52 this month from its February reading of 62, marking the lowest the index has been since November of 2001.

"Even as the lowest mortgage rates in decades continue to support new-home sales, builders are understandably concerned about continued economic weakness, the situation in Iraq and the anticipated effects of these developments on consumer behavior," said NAHB President Kent Conine.

The index is derived from a monthly survey of builders asked to rate current sales of single-family homes and sales expectations for the next six months as "good," "fair" or "poor." They are also asked to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." Scores for responses to each component are used to calculate a seasonally adjusted index, where any number greater than 50 indicates that more builders view sales conditions as good than poor.

All three of the component indexes retreated in March, following a solid showing in February. The index gauging current sales of new single-family homes fell 10 points to 59, while the index for expected sales in the next six months fell 9 points to 57 and the index gauging traffic of prospective buyers fell 8 points to 35, according to NAHB.

NAHB Chief Economist David Seiders said despite the plunge in builder confidence, there is no sense of panic. "It's more a sense of needing to be cautious heading forward," he said.

"Right now, builders are reacting to the potential for consumers to postpone anticipated new-home purchases. However, inventories of unsold new homes are still quite lean, so builder sentiment should rebound quickly in the months ahead as the geopolitical and economic uncertainties are resolved," Seiders said.

Washington, D.C.-based NAHB is a trade association representing more than 205,000 members involved in all aspects of residential and light commercial construction.